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Facebook (FB) in a Tight Spot After ProPublica's Expose?

A recent revelation by ProPublica has put Facebook (FB - Free Report) in a tough spot.

ProPublica, a non-profit organization that takes up investigative journalism in public interest, has claimed that Facebook’s self-serving ad platform “enabled advertisers to direct their pitches to the news feeds of almost 2,300 people who expressed interest in the topics of “Jew hater,” “How to burn jews,” or, “History of ‘why jews ruin the world.”

The outlet also claimed that it paid $30 to test if this was actually true. It paid the amount to target those groups with three promoted posts and much to its dismay, Facebook just took less than 15 minutes to approve these ads.

The development comes on the heels of Facebook’s revelation of Russian accounts spending nearly $100,000 in ads ahead of the U.S. elections. There has been widespread speculation that Russia indeed meddled with 2016 U.S Presidential elections resulting in Trump’s victory. Per the latest Business Insider report, Facebook is yet to ascertain the exact amount of ad purchases by Russian accounts in 2016.

The service has been under fire for quite some time now, given the extensive dissemination of fake news on its platform. The victory of Donald Trump is widely credited to fake news circulation on social media.

However, the news site added that it was likely to be an algorithm error rather than a human error as the self-servicing platform automatically started generating such categories based on what users stated about themselves.

However, after ProPublica’s revelation, Facebook said it has removed the fields in question. Facebook further added that, “Our community standards strictly prohibit attacking people based on their protected characteristics, including religion, and we prohibit advertisers from discriminating against people based on religion and other attributes.”

The company further added that “there are times where content is surfaced on our platform that violates our standards. We know we have more work to doso we’re also building new guardrails in our product and review processes to prevent other issues like this from happening in the future.”

Facebook has now set up monetization eligibility standards to make it clear that creators and publishers, which meet its strict guidelines, will be eligible to earn money on its platform. Repeated failure to comply with these terms will result in removal of access to the company’s monetization features.

This move is widely seen as Facebook’s efforts to address brand safety issues, which plagued Google’s YouTube earlier this year. This year in March, YouTube ran into trouble with advertisers as it was revealed that some ads ran before extremist videos, prompting advertisers to withdraw their ad spots, per media reports. Consequently, Google had to tighten its ad policy to lure advertisers back.

Putting in place stringent measures like this is the need of the hour for Facebook as it launches its dedicated video viewing tab, Watch.

Zacks Rank and Share Price Movement

Facebook carries a Zacks Rank #3 (Hold).

Notably, the company has outperformed the industry in the past year. Shares of Facebook have surged 33.2% compared with the industry’s 14.3% increase.

Long-term earnings growth rate for Applied Materials, Activision and FormFactor is currently projected to be 17.1%, 13.6% and 16%, respectively.

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